Summary

  • Mainfreight's share price has been on an upside run and is up by over 110% from $25.13 on 23 March to $53.87, as on 20 October 2020.
  • The Company stated that its revenue for the last 6 months to September 2020 is estimated to improve by 7.2% to $1.6 billion, and profit before tax is projected to rise by 23.4%, with particularly strong growth in Asia and Australia.
  • Mainfreight is gaining market share in transport with margins holding up, and there have been increased levels of sourcing enquiry in warehousing.
  • The Group's outlook remains positive with rising domestic transport volumes, improving customer sales and demand and growing pressure across the sea and air freight capabilities. However, the second wave of coronavirus is still affecting economies and posing significant risks.

Mainfreight's share price has surged by 114% since March lows. Its share price has nearly doubled from a low of $25.13 on 23 March to $53.87 on 20 October 2020.

On 21 October, Mainfreight last traded at $54.50, up by 1.17% from its last close.

The logistics and freight company surpassed $50 mark for the first time in history after declaring its revenue during the first half standing at $1.6 billion at the investor presentation of the Company.

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Mainfreight Limited (NZX:MFT) is a listed NZ company that provides air and ocean freight services, logistics and warehousing services in NZ and Australia.

The Company revealed in its market update dated 14 October that its revenue and profit before tax will improve by estimated 7.2% and 23.4% to $1.6 billion and $0.1 billion respectively, for 6 months ended in September.

Domestic volumes in New Zealand, which accounted for more than 33% of the Company earnings were estimated to be up by approximately 9% to $37.3 million. It was an increase of 99% to $30.5 million in Australia and up by 61% to $4 million in Asia during April 2020-September 2020.

Amid a variety of complexities associated with the current COVID-19 pandemic, circumstances in Europe and the Americas were a drain on profits.

Let's have a look at financial reports of these 2 regions.

  • Europe's revenue would rise by a meagre 0.2%, with underlying profit likely to be down by about 11.2% in the April-September 2020 period.
  • The conditions in the Americas were more complex, with an average 1.4% rise in revenue and a 13% decrease in profit.

 

COVID-19 and segment performance in NZ

The Company revealed in its presentation that the loss in traditional international tourism witnessed due to COVID-19 was counterbalanced by enhanced domestic tourism and returning kiwis. Overall volumes are on the rise, and the Company is well-placed to convert outsourcing and supply chain enquiries.

Let's have a look at the performance of Mainfreight across different segments in NZ.

Mainfreight stated that there had been continued trading improvements from reputable consumers and growing market shares throughout all the three divisions. Seasonal growths in trading, pre-Christmas, were anticipated, and Mainfreight continued being carefully optimistic.

 

Priorities and Actions

Some of the priorities and actions that were taken by the Group included of the following:

  • Continuation of focus on strong sales
  • High standards of quality services; flight to quality remains
  • Confidence to further strengthen domestic networks 
  • Increased capital expenditure in F22 
  • Emphasis on managing overheads
  • Cash flows / cash collection / cost and margin management

Further, the firm has applied review for European wage/salary from 1 October along with the full restoration of Directors' fees and Managing Director salary. 

Outlook

The overall outlook of the Company’s business is positive, with a rise in domestic transport volumes, improving customer sales and demand, increasing pressure across the sea and air freight capabilities.

The overall outlook of the business is positive with a rise in domestic transport volumes, improving consumer sales and demand, rising pressure throughout the sea and air freight capabilities.

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However, there remains the need for being cautious on pre-Christmas volumes, with the effects of secondary COVID-19 infection rates impacting economies further.

The Group stated that it was reacting to the uncertainties by taking a conservative approach on capital spending, although it was seeking land opportunities in Nelson and Auckland. In the next financial year, MFT expects to increase capital expenditure. 

The organisation will announce its performance for the first half on 11 November. 

(NOTE: Currency is reported in NZ Dollar unless stated otherwise)

 

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